Q: Which of the following is a correct formula for calculating the adjusted bank balance during a bank reconciliation?

$$\text{Adjusted Bank Balance} = \text{Unadjusted Bank Balance} + \text{Deposits in Transit} - \text{Outstanding Checks} \pm \text{Bank Errors}$$

Question 1

Which of the following is NOT one of the three elements of the fraud triangle?

Accepted Answer

Internal Audit

Question 2

A company discovers that an employee has been ordering goods, receiving them, and paying the supplier without oversight. Which internal control principle is most clearly being violated?

Accepted Answer

Separation of Duties

Question 3

According to the COSO framework, which component of internal control involves management setting a tone of integrity and ethical values?

Accepted Answer

Control Environment

Question 4

Which of the following is a limitation of internal controls?

Accepted Answer

They can be overridden by executive management.

Question 5

A company’s bank reconciliation shows a deposit in transit of $1,200. How should this be treated in the reconciliation process?

Accepted Answer

Add $1,200 to the bank balance

Question 6

Which journal entry is required after discovering a $50 NSF check during bank reconciliation?

Accepted Answer

Debit Accounts Receivable $$50; Credit Cash 50$$

Question 7

If a company’s unadjusted book balance is $$3,400 and it receives an EFT dividend of 900$$, what is the new book balance before considering other adjustments?

Accepted Answer

$4,300

Question 8

Which of the following is an example of a control activity?

Accepted Answer

Using pre-numbered documents

Question 9

A company’s bank statement shows a service charge of $20 not yet recorded in the books. What is the correct journal entry?

Accepted Answer

Debit Service Charge Expense $$20; Credit Cash 20$$

Question 10

Which of the following best describes the purpose of a bank reconciliation?

Accepted Answer

To ensure the company’s cash records match the bank’s records

Question 11

If a company’s accountant records a check for $$510, but the actual amount paid was 150$$, what adjustment is needed?

Accepted Answer

Add $360 to the book balance

Question 12

Which of the following is NOT a principle of control activities?

Accepted Answer

Market Segmentation

Question 13

A company’s internal controls require that the person who orders goods is different from the person who receives them. This is an example of:

Accepted Answer

Separation of Duties

Question 14

Which of the following would be added to the book balance during a bank reconciliation?

Accepted Answer

EFT receipts

Question 15

What is the main reason small businesses may have weaker internal controls?

Accepted Answer

They cannot afford to hire enough employees to separate duties

Question 16

Which of the following is a real-world example of the 'rationalization' element of the fraud triangle?

Accepted Answer

An employee believes they are underpaid and deserve more money

Question 17

If a bank error caused $100 to be deducted from your account for another company’s check, how should this be handled in the bank reconciliation?

Accepted Answer

Add $100 to the bank balance

Question 18

Which of the following is an example of a physical control?

Accepted Answer

Using safes and locked warehouses

Question 19

A company’s adjusted book balance after reconciliation is $$4,590. If the unadjusted book balance was 3$$,400, and the only additions were an EFT receipt of $$900 and a book error correction of 360$$, what is the total amount of subtractions made?

Accepted Answer

$70

Question 20

Which of the following is a correct formula for calculating the adjusted bank balance during a bank reconciliation?

Accepted Answer

$$	ext{Adjusted Bank Balance} = 	ext{Unadjusted Bank Balance} + 	ext{Deposits in Transit} - 	ext{Outstanding Checks} \pm 	ext{Bank Errors}$$

Internal Control and Cash: Study Notes

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